* Dollar up after strong U.S. data, ahead of Fed minutes (Updates to European markets close; adds commentary)

By Stephanie Kelly

NEW YORK, Jan 3 (Reuters) - World shares smashed records on Wednesday as U.S. equities advanced and European stocks closed higher on investor optimism in the new year, while the dollar rallied against key currencies ahead of minutes from last month’s Federal Reserve meeting.

MSCI’s gauge of stocks, which tracks shares in 47 countries, gained 0.40 percent. In 2017, the index’s best year since 2009, it set scores of record highs and rose by one-fifth in value.

U.S. equities also climbed to fresh highs on Wednesday, propelled by tech stocks. The benchmark S&P 500 breached the 2,700-mark for the first time, while the Nasdaq Composite and the Dow Jones Industrial Average also broke records.

DOLLAR REBOUNDS

The Japanese yen weakened 0.04 percent versus the greenback at 112.35 per dollar, while Sterling was last trading at $1.3518, down 0.50 percent on the day.

The euro was down 0.27 percent to $1.2025.

Benchmark U.S. Treasury 10-year notes last rose 5/32 in price to yield 2.4471 percent, from 2.465 percent late on Tuesday.

The 30-year bond last rose 11/32 in price to yield 2.7933 percent, from 2.81 percent late on Tuesday.

Investors are also awaiting the release later on Wednesday of minutes from last month’s Federal Reserve meeting. During the meeting, Fed policy makers decided to raise short-term interest rates for a third time in 2017.

“There’s a lot of focus around the discussion around what the potential impact of the tax bill was,” said Bill Northey, a senior vice president at U.S. Bank Wealth Management in Helena, Montana.

“Certainly there had to be some discussion around the economic impacts. I think that’s going to be one of the clear pieces of information value that we can draw from these minutes.”

Hawkish comments from two European Central Bank officials sent yields higher on Tuesday, with the 10-year German Bund yield hitting a two-month peak and the five-year U.S. yield reaching its highest level since April 2011.

Elsewhere, spot gold reached its highest since mid-September on Wednesday, before edging back to $1,316.11 per ounce.

Oil prices hit fresh two-and-a-half year highs as strong output in the United States and Russia balanced tensions from a sixth day of unrest in OPEC member Iran.

U.S. crude rose 2.02 percent to $61.59 per barrel and Brent was last at $67.77, up 1.8 percent on the day.

Reporting by Stephanie Kelly; Additional reporting by Abhinav
Ramnarayan and Oleg Vukmanovic in London, Sruthi Shankar in
Bengaluru, Richard Leong and Gertrude Chavez-Dreyfuss in New
York, and Henning Gloystein in Singapore; Editing by Nick
Zieminski